A commissioner vote Tuesday will thrust more than $4 million into the county coffers, dollars county staff and the commissioners say will be used exclusively for road capital improvements.
The move, however — touted as the first big step toward repairing and replacing the county’s aging and ailing road infrastructure — will also cause the county to incur a 15-year debt.
The move did not require voter approval.
Although county staff refer to the program as a “lease purchase” plan, Archuleta County Administrator Greg Schulte said during the March 29 road forum, “Really what it is, is a loan.”
Although borrowing for infrastructure or capital improvement projects without voter approval is not unprecedented — governments or special taxing entities such as the Pagosa Area Water and Sanitation District have commonly used revenue bonds to bankroll a variety of capital improvement projects — the tactic marks one the first such moves for Archuleta County, but the commissioners and staff say it’s worth it.
“This is not uncommon,” said Archuleta County Commissioner John Ranson. “It’s kind of like a home mortgage.”
And Ranson pointed to a number of factors that give him confidence the idea is sound — cheap money, i.e. low interest rates, a flagging local economy that will likely create an intensely competitive bidding climate for road projects, the probability that material and labor costs will only go up, and a desire to create jobs for locals.
“We think the roads are worth it. We think the cash flow is extremely important to the county. This is something were excited about. I’m excited about the opportunity to get started,” Ranson said.
According to the loan terms, the county will borrow $5 million with $4 million in net proceeds. The interest rate said Schulte is 5.7 percent for 15 years with an annual payment of about $484,000.
In order to secure the loan, the county pledged sales tax revenue already dedicated to road capital improvements as a repayment source, and the Archuleta County Courthouse as collateral.
According to county records sales tax revenue dedicated to the Road Capital Improvement Fund has averaged abut $1.54 million between 2004 and 2008. Current projections for 2009, indicate the county will likely maintain that average. Thus, the debt service on the loan package will obligate about 30 percent of Road Capital Improvement Fund dollars, giving the county a large safety buffer, said the commissioners during Tuesday’s discussion.
“We have 70 percent extra to cover this. Therefore, it is very conservative for this county,” Schulte said.
In addition to bankrolling a series of road capital improvement projects, the loan will be used to repay an existing equipment lease with Wells Fargo. The current balance on the existing lease purchase is $931,345.
With the commissioner vote ensuring that funding will soon arrive, Schulte said the county will have the financial muscle to aggressively follow through with their plans to pave Park Avenue and to tackle and complete a number of other projects during the summer of 2009.
In the meantime, Schulte said county staff and elected officials will discuss future road priorities with citizens in order to develop a project list and funding allocations for the 2010 construction season.
According to Schulte, after the county has demonstrated “credibility and ability to execute on projects,” a $12 million dollar ballot measure will be put to voters for approval in November 2010. If approved, the funding would provide early payback of the Wells Fargo loan and another $8 to $9 million for road capital improvement projects in 2011 and beyond.
During the March 29 road forum, staff and the commissioners said gaining voter trust during the next two summers is key to the success of the ballot question, and they acknowledged that the county has a formidable credibility problem to overcome.
As part of their trust-building strategy, Schulte and the commissioners said public input on road projects for the summer of 2010 will play a vital role in the process. In addition, Schulte said the county intends to create a roads task force that will serve as a clearinghouse for projects and priorities.
Further discussion on the makeup of the roads task force will likely occur May 19.